Auto Insurance 101: Waiver of Compulsory Excess Explained

Many people are unaware of what “compulsory excess” means until they’re unexpectedly required to pay it during a claim process. In this article, we will explain what car insurance excess is and how a waiver of compulsory excess can prevent these surprises and enhance your car insurance policy.

What is Excess in Car Insurance?

Excess in car insurance refers to the upfront amount that policyholders must pay before they can make a claim for a collision or damage. However, it’s important to note that excess will not be imposed in cases of:

• Loss or damage due to fire;
• Explosion;
• Lightning;
• Burglary;
• Housebreaking;
• Theft;
• Third-party damage;
• Third-party liability claims.

In simpler terms, the excess is the fixed amount car owners need to pay for accident-related damage under certain circumstances before their insurer covers the remaining costs. What are these circumstances? They vary depending on the type of excess. Here are the explanations.

Types of Car Insurance Excess

There are two types of excess in car insurance – Voluntary Excess and Compulsory Excess. Let’s explore the differences and circumstances that cause these two types of excess to apply before you can make a claim on your insurance.

1. Voluntary Excess

Voluntary excess is the amount you agree to pay when you make a car insurance claim. Generally, not all insurance companies make voluntary excess mandatory in their policies. However, you may need to compare different insurers to find a policy without a voluntary excess, which might result in higher insurance premiums.

Usually, the amount of voluntary excess is determined by the percentage of the total value of your insurance coverage. Some reasons for imposing voluntary excess include:

• The policyholder or car owner is under 21 years old;
• A high risk of the car being stolen;
• The vehicle is old.

2. Compulsory Excess

Compulsory excess sets a fixed amount, typically RM400, that you must pay before making an insurance claim. This applies if you or the person driving your car with your consent:

• Is under 21 years old;
• Holds a provisional (P) or Learner (L) driver’s license;
• Is an unnamed driver (not listed as an authorized driver in your policy)

However, different insurance companies may calculate the compulsory excess amount differently. This is based on factors such as:

• Your age as the policyholder;
• The type of claim you are making;
• The age of your vehicle;
• The length of time you have held your driving license.

In most cases, the compulsory excess can be higher for new drivers and for those whose cars are in higher insurance groups. For example, if you lend your car to your 20-year-old sibling and it gets into an accident causing RM2,000 in damage, you, as the car owner and policyholder, will have to pay RM400 upfront. Your insurance company will cover the remaining RM1,600.

If you are wondering whether you can avoid these excess costs in the event of an accident, the waiver of Compulsory Excess add-on can help!

What Is Waiver of Compulsory Excess Add-on?

In the event of an accident, the excess cost paid by the policyholder is non-refundable, even if both the car owner and driver are not at fault. To address this, some insurers offer additional protection known as a waiver of Compulsory Excess, which helps cover the excess cost.

For this coverage, you might have to pay an extra RM20 to RM30 on your insurance fee, but you won’t have to worry about the fixed RM400 compulsory excess.

In other words, having the waiver of compulsory excess coverage means you won’t have to pay any excess amount. Your insurer will fully cover the cost of the damage. Refer to our table below for a better understanding:

Do All Insurance Providers Offer Waiver of Compulsory Excess?

Not all insurance providers offer this option in their policies. If you are interested in a waiver of compulsory excess, it’s important to compare different insurers to find one that offers this coverage. Some providers may even offer this waiver for their comprehensive policyholders at no additional cost.

It’s also useful to note that excess clauses are not only applicable in auto insurance policies but can also be found in travel insurance, home insurance, and health insurance.

Understand Your Car Insurance Policy for Future Reference

In Malaysia, the minimum age to get a driving license is 17 years old, while the minimum age to purchase a car is 18 years old. Driving at this age categorizes individuals as high-risk drivers.

Therefore, understanding important terms and clauses such as excess and betterment in your insurance policy will help you as the policyholder to have a smooth insurance claim process in the future. Otherwise, you may find yourself wondering where the RM400 excess charge came from.

For more information on car insurance, or if you are planning to renew your car insurance, visit Qoala’s website for more information. With Qoala, you can compare and choose the best insurance company and get a free car insurance quote with an easy and fast process.